India’s real GDP growth slumps to multi-quarter low of 5.4%

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“India’s real Gross Domestic Product (GDP) growth slumped to a multi-quarter low of 5.4% in the July to September 2024 quarter (Q2 of 2024-25), from a five-quarter nadir of 6.7% in Q1, with Gross Value Added (GVA) growth slowing to 5.8% from 6.8% in Q1,” as per the National Statistical Office (NSO).

Real GDP growth stood at 8.1% in the second quarter of 2023-24, while GVA growth was 7.7% in that quarter.

Reserve Bank of India (RBI) officials, had in its October bulletin, estimated GDP growth of 6.8% in Q2 citing economic activity indicators, while the Central bank’s official estimate, as enunciated in its latest monetary policy review, was 7%.

Barring Agriculture and Services sectors, all segments of the economy reported a sharp deceleration from a year ago, with Mining and Quarrying GVA slipping into the red with a contraction of 0.1%, from an 11.1% uptick in Q2 last year.

Agriculture, livestock, forestry and fishing GVA grew 3.5%, more than double the 1.7% uptick recorded a year ago.

Manufacturing growth also hit a bump to drop to a mere 2.2% from 14.3% in Q2 of last year, while construction GVA rose 7.7%, about half the 13.6% uptick a year earlier.

Electricity, gas, water supply and other utility services’ GVA rose 3.3%, compared to 10.5% in July-September of 2023.

Public Administration, Defence and other services led the acceleration among services, with GVA rising 9.2% from 7.7% last year. GVA for trade, hotels, transport, communication and services related to broadcasting improved 6.6% from 4.5% a year earlier, while it was 6.7% higher for financial, real estate and professional services, marginally better than the 6.2% rise in Q2 of 2023-24.

“Despite sluggish growth observed in manufacturing (2.2%), mining and quarrying (-0.1%) sectors in Q2 of FY 2024-25, real GVA in H1 (April-September) has recorded a growth rate of 6.2%,” the NSO noted.

On the bright side, the NSO highlighted a rebound in consumption spending, pointing to a 6% growth in Private Final Consumption Expenditure (PFCE) in Q2 this year over the growth rate of 2.6% a year ago. However, this marks a slowdown from the first quarter of this year, when PFCE had risen 7.4%, the fastest in six quarters.

Growth in gross fixed capital formation, an indicator of capital investments in the economy, slipped to 5.4% from 7.5% in Q1, reflecting the slowest pace in at least six quarters.

While the RBI has projected a full-year GDP growth of 7.2% and the Finance Ministry expects growth in the 6.5% to 7% range, this may require a sharp rebound in the second half of the year with real GDP rising 6% between April and September as per the NSO data. This is the slowest six-month growth print since the second half of 2022-23 when GDP rose 5.3%, and markedly lower than the 8.2% rise recorded in the first half of 2023-24.